41.11A Study the following financial statements of two companies and then answer the questions which follow. Both companies are wholesalers of household products. The values shown are in 000s. Abraxas Ltd Buscema Ltd 000 000 000 000 Income Statements Sales 3,300 2,700 Less Cost of goods sold Opening inventory 410 216 Add Purchases 2,340 1,697 Less Closing inventory (460) (233) (2,290) (1.680) Gross profit 1,010 1,020 Less Expenses Wages and salaries 712 569 Directors' remuneration 85 175 Other expenses 147 168 (944) (912) Net profit 66 108 Balance Sheets Non-current assets Equipment at cost 474 210 Less Depreciation to date (212) (52) 262 158 Vans 213 117 Less Depreciation to date (85) (55) 128 62 390 220 Current assets Inventory 460 233 Accounts receivable 524 106 Bank 21 992 360 Total assets 1,382 580 Less Current liabilities Accounts payable (744) (179) Net assets 638 401 Equity Issued share capital 260 80 Retained profits 378 321 Total equity 638 Required: (a) Calculate the following ratios for both Abraxas Ltd and Buscema Ltd: 0 gross profit as percentage of sales; 6n) net profit as percentage of sales: Chil) expenses as percentage of sales; (iv) inventory turnover: ( rate of return of net profit on capital employed (for the purpose of this question only, take capital as being total of share capitals + reserves at the date of the balance sheet); (vi) current ratio: (vi) acid test ratio: (vii) accounts receivable days, (ix) accounts payable days. (b) Comment briefly on the performance of the two companies based on the ratios you have calcu- lated, suggesting possible reasons for your observations. 8 401 474 41.11A Study the following financial staternents of two companies and then answer the questions which follow. Both companies are wholesalers of household products. The values shown are in 000s. Abraxas Ltd Buscema Ltd 000 000 000 000 Income Statements Sales 3,300 2,700 Less Cost of goods sold Opening inventory 410 216 Add Purchases 2,340 1,697 Less Closing inventory (460) (233) (2,290 (1,680 Gross profit 1,010 1,023 Less Expenses Wages and salaries 712 569 Directors' remuneration 85 175 Other expenses 147 168 (944) (912) Net profit 66 108 Balance Sheets Non-current assets Equipment at cost 210 Less Depreciation to date (212) (52) 262 158 Vans 213 117 Less Depreciation to date (85) (55) 128 62 390 220 Current assets Inventory 460 233 Accounts receivable 524 106 Bank 21 992 360 Total assets 1,382 580 Less Current liabilities Accounts payable (744) (179) Net assets 638 401 Equity Issued share capital 260 80 Retained profits 378 321 Total equity 638 401 Required: (a) Calculate the following ratios for both Abraxas Ltd and Buscema Ltd: gross profit as percentage of sales, U net profit as percentage of sales; (in expenses as percentage of sales; (iv) inventory turnover; ( rate of return of net profit on capital employed (for the purpose of this question only, take capital as being total of share capitals + reserves at the date of the balance sheet): (vi) current ratio; (vii) acid test ratio: (vin) accounts receivable days, (ix) accounts payable days. (b) Comment briefly on the performance of the two companies based on the ratios you have calcu- lated, suggesting possible reasons for your observations. 8
